LONDON MARKET MIDDAY: FTSE 100 edges up led by Primark-owner AB Foods

(Alliance News) - The FTSE 100 was outperforming its European peers at midday Tuesday, despite strong wage growth figures and higher unemployment in the UK.

Investors are all eyeing a key interest rate decision from the European Central Bank on Thursday, which will kick start next week's decisions from the US Federal Reserve and the Bank of England.

The FTSE 100 index was up 41.82 points, 0.6%, at 7,538.69. The FTSE 250 was up 0.27 of a point at 18,522.71, and the AIM All-Share was down 0.65 of a point, 0.1%, at 741.70.

The Cboe UK 100 was up 0.6% at 750.93, the Cboe UK 250 was down 0.1% at 16159.03, and the Cboe Small Companies was down 0.3% at 13,393.92.

Figures from the Office for National Statistics on Tuesday showed the UK jobless rate rose to 4.3% in the three months that ended July from 4.2% in the three months to June.

The figure came in line with FXStreet-cited market consensus and, according to analysts at Lloyds Bank, provided some "tentative" evidence that pressures in the labour market may be starting to ease.

However, in the three months to July, annual growth in average total pay, including bonuses, accelerated to 8.5%. July's rise was faster than FXStreet-cited consensus, which had expected an unchanged growth reading from 8.2% in the previous three-month period.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, argues that it is these wage growth figures that continue to hold the Monetary Policy Committee's feet to the fire.

"The persistence of excessively vigorous wage growth in July probably means the MPC can't stop raising bank rate at this month's meeting," Tombs explained.

The Bank of England will announce its next interest rate decision on Thursday next week. At its last meeting in August, the central bank enacted its 14th successive increase, taking the benchmark bank rate to 5.25% from 5.00%.

Before then there are interest rate decisions from the US Federal Reserve and European Central Bank.

The ECB decision will be announced on Thursday at 1315 BST.

"This week's ECB decision is undoubtedly one of the toughest to call in this cycle. Weakening economic activity is strongly contrasting with still uncomfortably high inflation. Lately, the hawks have been making noise, adding to the suspense," said Roman Ziruk, senior market analyst at Ebury.

In European equities on Tuesday, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was down 0.5%.

The DAX was lagging behind its European peers at midday, following some mixed data on Germany's economic state.

The forward-looking ZEW indicator of economic sentiment edged up to minus 11.4 points in September, from minus 12.3 points a month before. The reading beat FXStreet-cited market consensus of minus 15.0 points

However, for Germany, the current situation tracker edged lower to 79.4 points in September from 71.3 points in August. This was worse than FXStreet-cited market consensus of minus 75.0 points.

In the FTSE 100, Associated British Foods rose 6.7%.

The fast-fashion retailer, via the Primark store chain, and food manufacturer, said in its financial year ending September 16 it performed slightly better than previous expectations.

Looking ahead, AB Foods said it continues to trade well, managing inflation, recovering cash margin and continuing to drive sales in a challenging macroeconomic environment.

AJ Bell's Russ Mould said its outlook "continues to be favourable."

"It is rolling out more shops, expanding a click and collect trial to include more products and it is pushing up prices where possible," Mould said.

"Even the non-retail parts of its business are generally doing well, with the company reporting brighter prospects ahead."

Smurfit shares sank 9.9% in London, whilst WestRock rose 7.2% in New York.

Smurfit said it has signed a definitive transaction agreement with the US's WestRock to combine as Smurfit Westrock.

The Dublin-headquartered paper-based packaging manufacturer said the merger will create a global leader in sustainable packaging, headquartered at Smurfit's current site in Dublin.

The new company's North and South American operations will be headquartered at WestRock's base in Atlanta, Georgia.

Smurfit said the combined firm will de-list from Euronext Dublin and cancel its premium listing on the London Stock Exchange, moving to a standard listing. It will have its primary listing on the New York Stock Exchange, where WestRock is currently traded, and seek US equity index inclusion.

In the FTSE 250, JTC rose 7.6%.

The Jersey-based fund management company said its reported pretax profit for the first half of 2023 was GBP11.9 million, down 43% from GBP21.0 million the previous year. However, underlying pretax profit, adding non-underlying items, reevaluation and foreign exchange gains, was up 16% to GBP19.7 million from GBP16.9 million.

Reported and underlying revenue increased 31% over the same periods, to GBP121.5 million from GBP93.0 million. Reported earnings before interest, tax, depreciation and amortisation increased 44% to GBP36.5 million from GBP25.3 million, and underlying Ebitda was up 31% to GBP40.2 million from GBP30.7 million.

JTC said it expects its "strong growth momentum" to continue, with full-year results ahead of current market expectations.

Chemring shed 4.6%.

The Romsey, England-based provider of technology products and services to aerospace, defence and security markets said it remains on track to meet its full-year expectations so long as the US Department of Defense approves countermeasure orders which represent around GBP25 million in revenue.

On AIM, Ocean Harvest Technology lost 15%.

The producer of seaweed ingredients for animal feed reports that revenue rose to EUR1.8 million in the first half of 2023 from EUR1.2 million a year ago. However, its pretax loss widened to EUR2.2 million from EUR1.3 million.

Stocks in New York were called lower. The Dow Jones Industrial Average was called down 0.1%, whilst the S&P 500 index and the Nasdaq Composite were called down 0.2%.

The pound was quoted at USD1.2468 at midday on Tuesday in London, down compared to USD1.2528 at the equities close on Monday. The euro stood at USD1.0718, lower against USD1.0747. Against the yen, the dollar was trading at JPY146.90, higher compared to JPY146.42.

Brent oil was quoted at USD91.22 a barrel at midday in London on Tuesday, up from USD90.42 late Monday. Gold was quoted at USD1,917.66 an ounce, down against USD1,923.84.

By Sophie Rose, Alliance News reporter

Comments and questions to newsroom@alliancenews.com

Copyright 2023 Alliance News Ltd. All Rights Reserved.